    [Appendix]
    [Government-Sponsored Enterprises]
    [From the U.S. Government Printing Office, www.gpo.gov]

                        GOVERNMENT-SPONSORED ENTERPRISES

        This chapter contains descriptions of and data on the Government-
    sponsored enterprises listed below. These enterprises were established
    and chartered by the Federal Government for public policy purposes. They
    are not included in the Federal budget because they are private
    companies. However, because of their public purpose, detailed statements
    of financial operations and condition are presented, to the extent such
    information is available, on a basis that is as consistent as
    practicable with the basis for the budget data of Government agencies.
    These statements are not reviewed by the President; they are presented
    as submitted by the enterprises.

        --The Student Loan Marketing Association is a for-profit financial
            corporation chartered by Congress in 1972 under the Higher
            Education Act (HEA) to help increase the availability of student
            loans. Sallie Mae carries out secondary market and other
            functions.

        --The Federal National Mortgage Association and the Federal Home
            Loan Mortgage Corporation provide   assistance to the secondary
            market for residential mortgages. Both are supervised by the
            Department of Housing and Urban Development  for  their  roles
            in helping to finance low-, moderate-, and middle-income
            housing; both are regulated for financial safety and soundness
            by the Office of Federal Housing Enterprise Oversight.

        --Institutions of the Farm Credit System the Agricultural Credit
            Bank and Farm Credit Banks--provide financial assistance to
            agriculture. They are supervised by the Farm Credit
            Administration.

        --The Federal Agricultural Mortgage Corporation, under the
            supervision of the Farm Credit Administration, provides a
            secondary mortgage market for agricultural real estate and
            certain rural housing loans as well as for farm and business
            loans guaranteed by the U.S. Department of Agriculture.

        --The Federal Home Loan Banks assist thrift institutions, banks,
            insurance companies, and credit unions in providing financing
            for housing and community development and are supervised by the
            Federal Housing Finance Board.

                       STUDENT LOAN MARKETING ASSOCIATION

                       Student Loan Marketing Association

                   Status of Direct Loans (in millions of dollars)

    ----------------------------------------------------------------------------
    Identification code 99-1500-0-3-502      2000 actual   2001 est.   2002 est.
    ----------------------------------------------------------------------------
    1111  Limitation on direct loans........
    1131  Direct loan obligations...........      13,904      11,294      12,284
                                               ---------   ---------  ----------
    1150  Total direct loan obligations.....      13,904      11,294      12,284
    ----------------------------------------------------------------------------

        Cumulative balance of direct loans
                    outstanding:
    1210  Outstanding, start of year........      37,797      37,213      31,833
    1231  Disbursements: Direct loan
            disbursements...................      13,904      11,294      12,284
          Repayments:

    1251    Repayments and prepayments......      -5,712      -4,834      -3,187
    1252    Proceeds from loan asset sales
              or discounted.................      -8,975     -12,000     -12,000
    1264  Write-offs for default: Other
            adjustments, net................         199         160         144
                                               ---------   ---------  ----------
    1290    Outstanding, end of year........      37,213      31,833      29,074
    ---------------------------------------------------------------------------

        The Student Loan Marketing Association (Sallie Mae) was created as a
    shareholder-owned government sponsored enterprise (GSE) by the Education
    Amendments of 1972 to expand funds available for student loans by
    providing liquidity to lenders engaged in the Federal Family Education
    Loan Program (FFELP), formerly the guaranteed student loan program
    (GSLP). Sallie Mae was privatized in 1997 pursuant to the authority
    granted by the Student Loan Marketing Association Reorganization Act of
    1996. The GSE is a wholly owned subsidiary of USA Education, Inc. and
    must wind down and be liquidated by September 30, 2008. Under
    legislation passed in 1998, if USA Education, Inc. affiliates with a
    depository institution, the GSE must wind down within two years (unless
    such period is extended by the Department of the Treasury).
        The GSE provides liquidity through direct purchase of insured
    student loans from eligible lenders and through warehousing advances,
    which are loans to lenders secured by insured student loans, Government
    or agency securities, or other acceptable collateral. In capital
    shortage areas, the GSE is authorized, at the request of Federal
    officials, to make insured loans directly to students. The GSE is
    authorized to advance funds to State agencies that will provide loans to
    students. The GSE is also authorized to provide a secondary market for
    noninsured loans; to serve as a guarantee agency in support of loan
    availability at the request of the Secretary of Education; to purchase
    and underwrite student loan revenue bonds; to provide certain additional
    services as determined by its board of directors to be supportive of the
    credit needs of students generally; and to provide financing for
    academic facilities and equipment.
        The GSE is authorized by the Health Professions Educational
    Assistance Act of 1976 to provide a secondary market for federally
    insured loans to graduate health professions students.
        Generally, under the privatization legislation, the GSE cannot
    engage in any new business activities or acquire any additional program
    assets other than purchasing student loans and serving, at the request
    of the Secretary of Education, as a lender-of-last-resort. The GSE can
    continue to make warehousing advances under contractual commitments
    existing on August 7, 1997.
        Operations.--The forecast data with respect to operations are based
    on certain general economic and specific FFELP loan volume assumptions
    and should not be relied upon as an official forecast of the
    corporation's future business.

                              ANNUAL LOAN ACTIVITY

                            [In millions of dollars]

                                         2000 actual  2001 est.   2002 est.
    Guaranteed student loans:
      Stafford:
        Purchased.......................       9,550       9,416      10,393
        Warehoused......................       1,100         300         150
      PLUS/SLS: Purchased...............       1,102         990       1,092
      Health professions loans;
        Purchased.......................           1
                                        ------------------------------------
          Subtotal, Guaranteed student
            loans.......................      11,753      10,706      11,635
    Other...............................       2,151         588         649
                                        ------------------------------------
          Total.........................      13,904      11,294      12,284
                                        ====================================

        Financing.--The GSE is financed by borrowing in the private debt
    markets and securitizing its assets. The GSE must wind down and be
    liquidated by September 30, 2008. All obligations of the GSE remaining
    upon liquidation must be placed into a defeasance trust. The GSE's
    outstanding adjust

    [[Page 1238]]

    able rate cumulative preferred stock is required to be redeemed prior to
    such date.
        The financial data contained in this material relating to future
    periods represents estimates that have been prepared specifically for
    inclusion in the President's Budget. These data should not be viewed as
    official forecasts of the corporation's future position, nor should they
    be used as a basis for making financial or investment decisions relating
    to the corporation. The data have been developed on the basis of certain
    economic assumptions that are subject to periodic review and revision.
    Consequently, the estimates are subject to forecast error and actual
    results from future business operations are likely to differ from these
    data.

                            Statement of Operations (in millions of dollars)

    -----------------------------------------------------------------------------------------------
    Identification code   99-1500-0-3-502    1999 actual    2000 actual     2001 est.      2002 est.
    -----------------------------------------------------------------------------------------------
    0101  Revenue...........................       2,854          3,647
    0102  Expense...........................      -2,391         -3,160
                                            ------------ --------------  ------------  -------------
    0105  Net income or loss (-)............         463            487
    -----------------------------------------------------------------------------------------------

                                 Balance Sheet (in millions of dollars)

    -----------------------------------------------------------------------------------------------
    Identification code   99-1500-0-3-502    1999 actual    2000 actual     2001 est.      2002 est.
    -----------------------------------------------------------------------------------------------
        ASSETS:
          Investments in US securities:

    1102    Treasury securities, par........       1,401          1,363         1,391          1,419
    1104    Agency securities, par..........
    1106    Receivables, net................         942          1,090           981            883
    1201  Investments in other securities,
            net.............................       2,009          2,393         2,310          2,483
    1206  Receivables, net..................         684            916           825            743
    1207  Advances and prepayments..........          16             21            22             23
          Net value of assets related to
              direct loans receivable and
              acquired defaulted guaranteed
              loans receivable:

    1601    Direct loans, gross.............      37,947         37,317        31,922         29,155
    1603    Allowance for estimated
              uncollectible loans and
              interest (-)..................        -150           -104           -89            -81
                                            ------------ --------------  ------------  -------------
    1699      Value of assets related to
                direct loans................      37,797         37,213        31,833         29,074
    1801  Cash and other monetary assets....          38            134           141            148
    1803  Property, plant and equipment, net         172            163           171            180
    1901  Other assets......................         435            407           426            447
                                            ------------ --------------  ------------  -------------
    1999    Total assets....................      43,494         43,700        38,100         35,400
        LIABILITIES:
    2202  Interest payable..................         293            417           375            338
    2203  Debt..............................      41,591         41,501        36,083         33,483
    2207  Other.............................         677            707           742            779
                                            ------------ --------------  ------------  -------------
    2999    Total liabilities...............      42,561         42,625        37,200         34,600
        NET POSITION:
    3300  Invested Capital..................         933          1,075           900            800
                                            ------------ --------------  ------------  -------------
    3999    Total net position..............         933          1,075           900            800
                                            ------------ --------------  ------------  -------------
    4999  Total liabilities and net position      43,494         43,700        38,100         35,400
    -----------------------------------------------------------------------------------------------

                      FEDERAL NATIONAL MORTGAGE ASSOCIATION

                               Portfolio Programs

                   Status of Direct Loans (in millions of dollars)

    ----------------------------------------------------------------------------
    Identification code 99-2500-0-3-371      2000 actual   2001 est.   2002 est.
    ----------------------------------------------------------------------------
    1131  Direct loan obligations...........     133,266     172,261     198,760
                                               ---------   ---------  ----------
    1150  Total direct loan obligations.....     133,266     172,261     198,760
    ----------------------------------------------------------------------------

        Cumulative balance of direct loans
                    outstanding:
    1210  Outstanding, start of year........     518,629     587,600     693,238
          Disbursements:

    1231    Direct loan disbursements.......     125,681     162,755     197,223
    1232    Purchase of loans assets........      11,747         536         170
    1251  Repayments: Repayments and
            prepayments.....................     -67,233     -57,653     -98,035
    1264  Write-offs for default: Other
            adjustments, net................      -1,224
                                               ---------   ---------  ----------
    1290    Outstanding, end of year........     587,600     693,238     792,596
    ---------------------------------------------------------------------------

        The Federal National Mortgage Association (Fannie Mae) is a
    federally-chartered, privately-owned company with a public mission to
    provide stability and to increase the liquidity of the residential
    mortgage market and to help increase the availability of mortgage credit
    to low- and moderate-income families and in underserved areas. In
    carrying out its mission, Fannie Mae engages primarily in two forms of
    business: investing in portfolios of residential mortgages and
    guaranteeing residential mortgage securities. As of September 30, 2000,
    Fannie Mae held a net mortgage portfolio totaling $571 billion and had
    net outstanding guaranteed mortgage-backed securities of $701 billion.
        Through a federal charter, Congress has equipped Fannie Mae with
    certain attributes to help it carry out its public mission. These
    include an exemption from state and local taxes (except real property
    taxes), and an exemption of its debt and mortgage securities from
    Securities and Exchange Commission registration requirements. An
    additional advantage is that the Secretary of the Treasury may purchase
    and hold up to $2.25 billion of securities issued by Fannie Mae under
    terms and conditions and at prices determined by the Secretary to be
    appropriate. Securities guaranteed by Fannie Mae and debt issued by the
    company are solely the corporation's obligations and are not backed by
    the full faith and credit of the U.S. Government. The common stock of
    the corporation is owned by the public, is fully transferable, and
    trades on the New York, Midwest, and Pacific stock exchanges.
        Fannie Mae was established in 1938 to assist private markets in
    providing a steady supply of funds for housing. Fannie Mae was
    originally a subsidiary of the Reconstruction Finance Corporation and
    was permitted to purchase only loans insured by the Federal Housing
    Administration (FHA). In 1954, Fannie Mae was restructured as a mixed
    ownership (part government, part private) corporation. Congress sold the
    government's remaining interest in Fannie Mae in 1968 and completed the
    transformation to private shareholder ownership in 1970. Using the
    proceeds from the sale of subordinated debentures, Fannie Mae paid the
    Treasury $216 million for the government's preferred stock, which was
    retired, and for the Treasury's interest in the corporation's earned
    surplus. As a result, the corporation was taken off the federal budget.
        In 1992, Congress reaffirmed and clarified Fannie Mae's role in the
    housing finance system through charter act amendments included in the
    Federal Housing Enterprises Financial Safety and Soundness Act of 1992
    (``The Act''). Fannie Mae's charter purposes, as amended by the Act,
    are: ``to provide stability in the secondary market for residential
    mortgages; respond appropriately to the private capital market; provide
    ongoing assistance to the secondary market for residential mortgages
    (including activities relating to mortgages on housing for low- and
    moderate-income families involving a reasonable economic return that may
    be less than the return earned on other activities); and promote access
    to mortgage credit throughout the Nation (including central cities,
    rural areas, and underserved areas) by increasing the liquidity of
    mortgage investments and improving the distribution of investment
    capital for residential mortgage financing.''
        In December 1995, the U.S. Department of Housing and Urban
    Development (HUD) set affordable housing goals for 1996-1999 and
    established the requirements for counting mortgage purchases to low- and
    moderate-income families and families living in underserved areas with
    specific census tract and minority concentration requirements. Under the
    regulations, the low- and moderate-income goal is 42 percent; the

    [[Page 1239]]

    geographically targeted goal is 24 percent and the special affordable
    housing goal is 14 percent. These goals are also in effect for 2000.
    Fannie Mae exceeded all of the housing goals in 1999 with low- and
    moderate-income purchases at 45.9 percent, geographically targeted
    purchases at 26.8 percent, and special affordable housing purchases at
    17.6 percent.
        In October 2000, HUD set new affordable housing goals for the period
    covering 2001 to 2003. The goals are 50 percent for the low- and
    moderate-income goal, 31 percent for the geographically targeted goal,
    and 20 percent for the special affordable housing goal.
        The Act also established the Office of Federal Housing Enterprise
    Oversight (OFHEO), an independent office within HUD, headed by a
    Director who reports directly to the Congress. OFHEO has statutory
    responsibility for ensuring that Fannie Mae is adequately capitalized
    and operating in a safe and sound manner. Included among the express
    statutory authorities of the Director is the authority to conduct
    examinations of the financial health of the company and to issue minimum
    and risk-based capital standards. The minimum capital requirements are
    computed from statutorily established ratios that are applied to the
    assets and off-balance sheet risks of Fannie Mae. The risk-based capital
    standard determines the amount of capital that Fannie Mae must hold to
    withstand the impact of simultaneous adverse credit and interest rate
    stresses over a 10-year period, plus an additional 30 percent to cover
    management and operations risk. Total capital (shareholder's equity plus
    allowance for loan losses) at the end of September 2000 was $20.5
    billion. The company has continued to remain in compliance with
    applicable capital standards and has been deemed adequately capitalized
    by OFHEO since its first classification in June 1993.
        For the four quarters ending September 2000, Fannie Mae earned $4.3
    billion.
        The financial data contained in this material relating to future
    periods represent estimates that have been prepared specifically for
    inclusion in the President's Budget. These data should not be viewed as
    an official forecast of the corporation's future position, nor should
    they be used as a basis for making financial or investment decisions
    relating to the corporation. The data have been developed on the basis
    of certain economic assumptions that are subject to periodic review and
    revision. Consequently, the estimates are subject to forecast error and
    actual results from future business operations are likely to differ from
    these data.

                                 Balance Sheet (in millions of dollars)

    -----------------------------------------------------------------------------------------------
    Identification code   99-2500-0-3-371    1999 actual    2000 actual     2001 est.      2002 est.
    -----------------------------------------------------------------------------------------------
        ASSETS:
    1101  Fund balances.....................           5             20
          Investments in US securities:

    1102    Treasury securities, par........          33             25
    1104    Other...........................      36,498         55,130        57,714         63,386
          Net value of assets related to
              direct loans receivable and
              acquired defaulted guaranteed
              loans receivable:

    1601    Direct loans (net of discount)..     477,130        538,255       635,655        734,714
    1602    Federal Agencies................      27,367         33,349        41,896         41,374
    1603    Allowance for estimated
              uncollectible loans and
              interest (-)..................        -194           -199          -201           -204
                                            ------------ --------------  ------------  -------------
    1699      Value of assets related to
                direct loans................     504,303        571,405       677,351        775,884
    1801  Cash and other monetary assets....      10,513         11,345        12,316         13,885
    1803  Property, plant and equipment, net         180            222
                                            ------------ --------------  ------------  -------------
    1999    Total assets....................     551,532        638,147       747,380        853,156
        LIABILITIES:
    2101  Accounts payable..................         254            385
    2102  Accrued interest payable..........       6,575          7,509        10,177         11,787
    2105  Other.............................          11             15
    2203  Debt..............................     524,880        607,039       711,031        812,430
    2204  Estimated liability for loan
            guarantees......................       2,311          3,119         3,635          3,510
    2206  Pension and other actuarial
            liabilities.....................         288            362
    2207  Subtotal, Federal taxes payable...         160             31
                                            ------------ --------------  ------------  -------------
    2999    Total liabilities...............     534,477        618,460       724,843        827,726
        NET POSITION:
          Cumulative results of operations:

    3300    Cumulative results of operations      17,674         20,769        24,311         28,323
    3300    Change in Stockholder Equity....        -619         -1,083        -1,773         -2,893
                                            ------------ --------------  ------------  -------------
    3999    Total net position..............      17,055         19,687        22,538         25,429
                                            ------------ --------------  ------------  -------------
    4999  Total liabilities and net position     551,532        638,147       747,380        853,156
    -----------------------------------------------------------------------------------------------

                             mortgage-backed securities

                   Status of Direct Loans (in millions of dollars)

    ----------------------------------------------------------------------------
    Identification code 99-2501-0-3-371      2000 actual   2001 est.   2002 est.
    ----------------------------------------------------------------------------
    1131  Direct loan obligations...........     160,105     232,349     237,019
                                               ---------   ---------  ----------
    1150  Total direct loan obligations.....     160,105     232,349     237,019
    ----------------------------------------------------------------------------

        Cumulative balance of direct loans
                    outstanding:
    1210  Outstanding, start of year........     938,484   1,020,828   1,126,939
    1231  Disbursements: Direct loan
            disbursements...................     194,154     232,349     237,019
    1251  Repayments: Repayments and
            prepayments.....................    -111,810    -126,237    -144,766
                                               ---------   ---------  ----------
    1290    Outstanding, end of year........   1,020,828   1,126,939   1,219,193
    ---------------------------------------------------------------------------

        According to accounting practices for private corporations, the
    mortgages in the pools of loans supporting the mortgage-backed
    securities are considered to be owned by the holders of these
    securities. Consequently, on the books of the Federal National Mortgage
    Association (Fannie Mae), these mortgages are not considered assets and
    the securities outstanding are not considered liabilities. However, the
    concepts of the budget of the U.S. Government consider these mortgages
    and mortgage-backed securities to be assets and liabilities,
    respectively, of Fannie Mae. For the purposes of this document,
    therefore, they are presented as assets and liabilities in the
    accompanying schedules. On the schedule of Status of direct loans for
    mortgage-backed securities, the items labeled ``New loans'' and
    ``Recoveries: Repayments and prepayments'' are budgetary terms. However,
    from the Corporation's perspective, these items are ``Amounts issued''
    and ``Amounts passed through to the holders of securities'',
    respectively.
        The financial data contained in this material relating to future
    periods represent estimates that have been prepared specifically for
    inclusion in the President's Budget. These data should not be viewed as
    an official forecast of the corporation's future position, nor should
    they be used as a basis for making financial or investment decisions
    relating to the corporation. The data have been developed on the basis
    of certain economic assumptions that are subject to periodic review and
    revision. Consequently, the estimates are subject to forecast error and
    actual results from future business operations are likely to differ from
    these data.

                                 Balance Sheet (in millions of dollars)

    -----------------------------------------------------------------------------------------------
    Identification code   99-2501-0-3-371    1999 actual    2000 actual     2001 est.      2002 est.
    -----------------------------------------------------------------------------------------------
        ASSETS:
          Net value of assets related to
              direct loans receivable and
              acquired defaulted guaranteed
              loans receivable:

    1601    Direct loans, gross.............     939,092      1,021,437     1,127,548      1,219,798
    1603    Allowance for estimated
              uncollectible loans and
              interest (-)..................        -608           -609          -609           -605
                                            ------------ --------------  ------------  -------------
    1699      Value of assets related to
                direct loans................     938,484      1,020,828     1,126,939      1,219,193
                                            ------------ --------------  ------------  -------------
    1999    Total assets....................     938,484      1,020,828     1,126,939      1,219,193
        LIABILITIES:
    2104  Resources payable.................     938,484      1,020,828     1,126,939      1,219,193
                                            ------------ --------------  ------------  -------------

    [[Page 1240]]

    2999    Total liabilities...............     938,484      1,020,828     1,126,939      1,219,193
    -----------------------------------------------------------------------------------------------

                     FEDERAL HOME LOAN MORTGAGE CORPORATION

                               Portfolio Programs

                   Status of Direct Loans (in millions of dollars)

    ----------------------------------------------------------------------------
    Identification code 99-4420-0-3-371      2000 actual   2001 est.   2002 est.
    ----------------------------------------------------------------------------
    1131  Direct loan obligations...........      81,090      95,778     100,750
                                               ---------   ---------  ----------
    1150  Total direct loan obligations.....      81,090      95,778     100,750
    ----------------------------------------------------------------------------

        Cumulative balance of direct loans
                    outstanding:
    1210  Outstanding, start of year........     315,968     361,624     412,251
    1231  Disbursements: Direct loan
            disbursements...................      81,090      95,778     100,750
    1251  Repayments: Repayments and
            prepayments.....................     -35,434     -45,151     -40,113
                                               ---------   ---------  ----------
    1290    Outstanding, end of year........     361,624     412,251     472,888
    ---------------------------------------------------------------------------

        The Federal Home Loan Mortgage Corporation (Freddie Mac), is a
    federally-charted, shareholder-owned, private company with a public
    mission to provide stability and increase the liquidity of the
    residential mortgage market, and to help increase the availability of
    mortgage credit to low- and moderate-income families and in underserved
    areas. In carrying out its mission, Freddie Mac engages primarily in two
    forms of business: investing in portfolios of residential mortgages and
    guaranteeing residential mortgage securities. As of September 30, 2000,
    Freddie Mac held a net mortgage portfolio totaling $359 billion and had
    net outstanding guaranteed mortgage-backed securities of $559 billion.
        Through a federal charter, Congress has equipped Freddie Mac with
    certain advantages over wholly private firms in carrying out these
    activities. These advantages include an exemption from state and local
    taxes (except real property taxes), and an exemption for their debt and
    mortgage securities from SEC filing registration requirements. An
    additional advantage is that the Secretary of the Treasury may purchase
    and hold up to $2.25 billion of securities issued by Freddie Mac under
    terms and conditions and at prices determined by the Secretary to be
    appropriate. Securities guaranteed by Freddie Mac and debt issued by the
    company are explicitly not backed by the full faith and credit of the
    U.S. Government. The common stock of the corporation is owned by the
    public, is fully transferable, and trades on the New York and Pacific
    stock exchanges.
        Freddie Mac was established in 1970 under the Emergency Home Finance
    Act. Congress chartered Freddie Mac to provide mortgage lenders with an
    organized national secondary market enabling them to manage their
    conventional mortgage portfolio more effectively and gain indirect
    access to a ready source of additional funds to meet new demands for
    mortgages. Freddie Mac serves as a conduit facilitating the flow of
    investment dollars from the capital markets to mortgage lenders, and
    ultimately, to homebuyers, increasing the amount of mortgage credit
    available and making it more affordable.
        The Financial Institutions Reform, Recovery, and Enforcement Act of
    1989 (FIRREA) significantly changed the corporate governance of Freddie
    Mac. The company's three member Board of Directors, which had
    corresponded with the Federal Home Loan Bank Board, was replaced with an
    eighteen member Board of Directors. Thirteen board members are elected
    annually by shareholders and five are annually appointed by the
    President of the United States. In addition, FIRREA converted Freddie
    Mac's 60 million shares of non-voting, senior participating preferred
    stock into voting common stock. As a result, the corporation was taken
    off the federal budget.
        FIRREA also clarified Freddie Mac's role in the housing finance
    delivery system through amendments to its charter act. Specifically,
    FIRREA established Freddie Mac's public mission: ``to provide stability
    in the secondary market for residential mortgages; respond appropriately
    to the private capital market; and provide ongoing assistance to the
    secondary market for residential mortgages (including activities
    relating to mortgages on housing for low- and moderate-income families
    involving a reasonable economic return that may be less than the return
    earned on other activities.'' The Federal Housing Enterprise Financial
    Safety and Soundness Act of 1992 (``The Act'') added to Freddie Mac's
    public mission the promotion of ``access to mortgage credit throughout
    the Nation (including central cities, rural areas, and underserved
    areas) by increasing the liquidity of mortgage investments and improving
    the distribution of investment capital for residential mortgage
    financing.''
        The Act also established affordable housing goals that are designed
    to improve the flow of mortgage funds to low- and moderate-income
    families and families in central cities, rural areas, and other
    underserved areas. In December 1995, the U.S. Department of Housing and
    Urban Development (HUD) affordable housing goals for 1996-1999 and
    established the requirements for counting mortgage purchases for meeting
    these goals. The goals provide that, of the total number of dwelling
    units financed by Freddie Mac's mortgage purchases, 42 percent meet the
    low- and moderate-income goal, 24 percent meet the geographically
    targeted goal, and 14 percent meet the special affordable goal.
    Additionally, within the special affordable goal was a multifamily
    mortgage purchase target for Freddie Mac of $1.0 billion. In an October
    2000 rule, HUD applied the 1996-1999 goals to 2000 and established new
    goals for 2001-2003: 50 percent for the low- and moderate-income goal,
    31 percent for the geographically targeted goal, 20 percent for the
    special affordable housing goal and a multifamily target for Freddie Mac
    of $2.1 billion.
        Freddie Mac exceeded all of the housing goals in 1999 with low- and
    moderate-income purchases of 46.1 percent, geographically targeted
    purchases of 27.5 percent, special affordable purchases of 17.2 percent,
    and the multifamily portion of the special affordable purchases of $2.3
    billion in qualifying multifamily mortgages.
        The Act also enhanced the regulatory oversight of Freddie Mac by
    establishing the Office of Federal Housing Enterprise Oversight (OFHEO),
    an independent office within HUD, headed by a Director appointed by the
    President. OFHEO is responsible for ensuring that Freddie Mac is
    adequately capitalized and operating in a safe and sound manner.
    Included among the express statutory authorities of the Director is the
    authority to conduct examinations of the financial health of the company
    and to issue minimum and risk-based capital standards. The minimum
    capital requirements are computed from statutorily established ratios
    that are applied to the assets and off-balance sheet risks of Freddie
    Mac. The risk-based capital standard determines the amount of capital
    that Freddie Mac must hold to withstand the impact of simultaneous
    adverse credit and interest rate stresses over a 10-year period, plus an
    additional amount to cover management and operations risk. OFHEO intends
    to issue a final rule in 2001 establishing the risk-based capital
    standards.
        For the four quarters ending September 2000, Freddie Mac recorded
    net income of $2.5 billion.
        The financial data contained in this material relating to future
    periods represent estimates that have been prepared

    [[Page 1241]]

    specifically for inclusion in the President's budget. These data should
    not be viewed as an official forecast of the corporation's future
    position, nor should they be used as a basis for making financial or
    investment decisions relating to the corporation. The data have been
    developed on the basis of certain economic assumptions that are subject
    to periodic review and revision. Consequently, the estimates are subject
    to forecast error and actual results from future business operations are
    likely to differ from these data.
        According to generally accepted accounting principles utilized by
    private corporations, the mortgages in the pools of loans supporting PCs
    are considered to be owned by the holder of these securities. Therefore,
    Freddie Mac does not show these mortgages as assets. However, the budget
    philosophy of the United States Government includes these mortgages and
    mortgages pass-through securities as assets and liabilities,
    respectively, of Freddie Mac. For the purpose of this document,
    therefore, they are presented as assets and liabilities in the
    accompanying schedules. On the Status of Direct Loans schedule for
    mortgage pass-through securities, the items labeled ``Disbursements''
    and ``Repayments'' are budgetary terms. However, from Freddie Mac's
    perspective, these amounts represent ``Sales of PCs'' and ``Amounts
    passed through to PC holders,'' respectively.

                                 Balance Sheet (in millions of dollars)

    -----------------------------------------------------------------------------------------------
    Identification code   99-4420-0-3-371    1999 actual    2000 actual     2001 est.      2002 est.
    -----------------------------------------------------------------------------------------------
        ASSETS:
    1201  Investments in other securities,
            net.............................      26,515         48,593        54,693         56,070
    1206  Receivables, net..................      18,643         22,107        22,082         22,832
    1207  Advances and prepayments..........         487            945         1,838          1,838
          Net value of assets related to
              direct loans receivable and
              acquired defaulted guaranteed
              loans receivable:

    1601    Retained mortgage inventory.....     315,968        361,624       412,251        472,888
    1603    Allowances (-)..................        -345           -334          -339           -360
                                            ------------ --------------  ------------  -------------
    1699      Value of assets related to
                direct loans................     315,623        361,290       411,912        472,528
    1801  Cash and other monetary assets....       1,992            224           252            259
    1803  Property, plant and equipment, net       1,129            656           598            541
    1901  Other assets......................         496           -469         2,162          2,292
                                            ------------ --------------  ------------  -------------
    1999    Total assets....................     364,885        433,346       493,537        556,360
        LIABILITIES:
    2101  Accounts payable..................         115            227           448            884
    2201  Accounts payable..................       2,146          1,823         1,448          1,011
    2202  Interest payable..................       2,311          2,988         6,331          6,844
    2203  Debt..............................     341,014        406,794       461,625        521,647
    2206  Pension and other actuarial
            liabilities.....................          19             26            36             49
          Other:

    2207    Accrued payroll and benefits....          82             60            44             32
    2207    Accrued annual leave (funded or
              unfunded).....................           2              2             2              2
    2207    Other Liabilities...............       8,056          8,234         7,742          7,923
                                            ------------ --------------  ------------  -------------
    2999    Total liabilities...............     353,745        420,154       477,676        538,392
        NET POSITION:
    3100  Invested capital..................      11,140         13,192        15,861         17,968
                                            ------------ --------------  ------------  -------------
    3999    Total net position..............      11,140         13,192        15,861         17,968
                                            ------------ --------------  ------------  -------------
    4999  Total liabilities and net position     364,885        433,346       493,537        556,360
    -----------------------------------------------------------------------------------------------

                           Mortgage-Backed Securities

                   Status of Direct Loans (in millions of dollars)

    ----------------------------------------------------------------------------
    Identification code 99-4440-0-3-371      2000 actual   2001 est.   2002 est.
    ----------------------------------------------------------------------------
    1131  Direct loan obligations...........     142,576     185,781     183,085
                                               ---------   ---------  ----------
    1150  Total direct loan obligations.....     142,576     185,781     183,085
    ----------------------------------------------------------------------------

        Cumulative balance of direct loans
                    outstanding:
    1210  Outstanding, start of year........     529,213     559,242     611,015
    1231  Disbursements: Direct loan
            disbursements...................     142,576     185,781     183,085
    1251  Repayments: Repayments and
            prepayments.....................    -112,547    -134,008    -107,029
                                               ---------   ---------  ----------
    1290    Outstanding, end of year........     559,242     611,015     687,071
    ---------------------------------------------------------------------------

                                 Balance Sheet (in millions of dollars)

    -----------------------------------------------------------------------------------------------
    Identification code   99-4440-0-3-371    1999 actual    2000 actual     2001 est.      2002 est.
    -----------------------------------------------------------------------------------------------
        ASSETS:
    1901  Underlying Mortgages..............     529,231        559,242       611,015        687,071
                                            ------------ --------------  ------------  -------------
    1999    Total assets....................     529,231        559,242       611,015        687,071
        LIABILITIES:
    2104  Resources payable.................     529,213        559,242       611,015        687,071
                                            ------------ --------------  ------------  -------------
    2999    Total liabilities...............     529,213        559,242       611,015        687,071
    -----------------------------------------------------------------------------------------------

                               FARM CREDIT SYSTEM

        The Farm Credit System is a government sponsored enterprise that
    provides privately financed credit to agricultural and rural
    communities. The major functional entities of the system are: (1)
    Agricultural Credit Bank (ACB), (2) Farm Credit Banks (FCB), and (3)
    direct lender associations. The history and specific functions of the
    bank entities are discussed after the presentation of financial
    schedules for each bank entity. As part of the Farm Credit System (FCS),
    these entities are regulated and examined by the Farm Credit
    Administration (FCA), an independent Federal agency. The administrative
    costs of FCA are currently financed by assessments of system
    institutions. System banks finance loans primarily from sales of bonds
    to the public and their own capital funds. The system bonds issued by
    the banks are not guaranteed by the U.S. Government either as to
    principal or interest. The bonds are backed by an insurance fund,
    administered by the Farm Credit System Insurance Corporation (FCSIC), an
    independent Federal agency that collects insurance premiums from member
    banks to pay its administrative expenses and fund insurance reserves.
    All of the banks' current operating expenses are paid from their own
    income and do not require budgetary resources from the Federal
    Government. Limited Federal assistance is provided to support interest
    payments on special FCS Financial Assistance Corporation (FAC) debt
    obligations (see discussion of FAC elsewhere in this document).

                            Agricultural Credit Bank

        On July 1, 1999, the remaining cooperative entity, the St. Paul Bank
    for Cooperatives, merged into CoBank ACB. This bank is headquartered in
    Denver, Colorado and serves eligible cooperatives nationwide, and
    provides funding to Agricultural Credit Associations (ACAs) in one of
    its regions. An ACB operates under statutory authority that combines the
    authorities of a FCB and a Bank for Cooperatives (BC). In exercising its
    FCB authority, CoBank ACB's charter limits its lending to ACAs located
    in the region previously served by the Farm Credit Bank of Springfield.
    As an entity lending to Cooperatives, CoBank is independently chartered
    to provide credit and related services nationwide to eligible
    cooperatives primarily engaged in farm supply, grain, marketing and
    processing (including sugar and dairy). CoBank also makes loans to rural
    utilities, including telecommunications companies and it provides
    international loans for the financing of agricultural exports.

                   Status of Direct Loans (in millions of dollars)

    ----------------------------------------------------------------------------
    Identification code 99-4130-0-3-351      2000 actual   2001 est.   2002 est.
    ----------------------------------------------------------------------------
    1131  Direct loan obligations...........      48,122      50,000      50,000
                                               ---------   ---------  ----------
    1150  Total direct loan obligations.....      48,122      50,000      50,000
    ----------------------------------------------------------------------------

    [[Page 1242]]

        Cumulative balance of direct loans
                    outstanding:
    1210  Outstanding, start of year........      18,092      19,270      19,752
    1231  Disbursements: Direct loan
            disbursements...................      48,121      50,000      50,000
    1251  Repayments: Repayments and
            prepayments.....................     -46,896     -49,502     -49,310
    1263  Write-offs for default: Direct
            loans...........................         -47         -16         -16
                                               ---------   ---------  ----------
    1290    Outstanding, end of year........      19,270      19,752      20,426
    ---------------------------------------------------------------------------

                            Statement of Operations (in millions of dollars)

    -----------------------------------------------------------------------------------------------
    Identification code   99-4130-0-3-351    1999 actual    2000 actual     2001 est.      2002 est.
    -----------------------------------------------------------------------------------------------
    0101  Total interest income.............       1,424          1,715         1,930          2,050
    0102  Total interest expense............      -1,063         -1,323        -1,489         -1,581
                                            ------------ --------------  ------------  -------------
    0105  Net income or loss (-)............         361            392           441            469
    0111  Other income......................          46             39            44             46
    0112  Other expense.....................        -323           -257          -278           -287
                                            ------------ --------------  ------------  -------------
    0115  Net income or loss (-)............        -277           -218          -234           -241
                                            ------------ --------------  ------------  -------------
    0191  Total revenues....................       1,470          1,754         1,974          2,096
                                            ------------ --------------  ------------  -------------
    0192  Total expenses....................      -1,386         -1,580        -1,767         -1,868
                                            ------------ --------------  ------------  -------------
    0195  Total income or loss (-)..........          84            174           207            228
                                            ------------ --------------  ------------  -------------
    0199  Total comprehensive income........          84            174           207            228
    -----------------------------------------------------------------------------------------------

                                 Balance Sheet (in millions of dollars)

    -----------------------------------------------------------------------------------------------
    Identification code   99-4130-0-3-351    1999 actual    2000 actual     2001 est.      2002 est.
    -----------------------------------------------------------------------------------------------
        ASSETS:
    1201  Cash and investment securities....       3,755          4,318         4,426          4,578
    1206  Accrued interest receivable on
            loans...........................         182            203           208            215
          Net value of assets related to
              direct loans receivable and
              acquired defaulted guaranteed
              loans receivable:

    1601    Direct loans, gross.............      18,092         19,270        19,752         20,426
    1603    Allowance for estimated
              uncollectible loans and
              interest (-)..................        -314           -321          -329           -340
                                            ------------ --------------  ------------  -------------
    1699      Value of assets related to
                direct loans................      17,778         18,949        19,423         20,086
    1803  Property, plant and equipment, net         159            167           176            179
                                            ------------ --------------  ------------  -------------
    1999    Total assets....................      21,874         23,637        24,233         25,058
        LIABILITIES:
    2104  Resources payable.................         167            301           184            170
          Accounts payable:

    2201    Consolidated systemwide and
              other bank bonds..............      19,468         20,971        21,495         22,229
    2201    Notes payable and other
              interest-bearing liabilities..         351            302           310            320
    2202  Accrued interest payable..........         228            310           318            229
                                            ------------ --------------  ------------  -------------
    2999    Total liabilities...............      20,214         21,884        22,307         22,948
        NET POSITION:
    3300  Cumulative results of operations..       1,660          1,753         1,926          2,110
                                            ------------ --------------  ------------  -------------
    3999    Total net position..............       1,660          1,753         1,926          2,110
                                            ------------ --------------  ------------  -------------
    4999  Total liabilities and net position      21,874         23,637        24,233         25,058
    -----------------------------------------------------------------------------------------------

                       Statement of Changes in Net Worth (in millions of dollars)

    -----------------------------------------------------------------------------------------------
                          99-4130            1999 actual    2000 actual     2001 est.      2002 est.
    -----------------------------------------------------------------------------------------------
    Beginning balance of net worth..........       1,697          1,660         1,753          1,926
                                            ============ ==============  ============  =============

      Capital stock and participations
        issued..............................           5                           67             56
      Capital stock and participations
        retired.............................          80             53            60             60
      Net income............................          84            174           206            228
      Cash/Dividends/Patronage Distributions         -27            -36           -40            -40
      Other, net............................         -19              8
                                            ------------ --------------  ------------  -------------
    Ending balance of net worth.............       1,660          1,753         1,926          2,110
    -----------------------------------------------------------------------------------------------

                             Financing Activities (in millions of dollars)

    -----------------------------------------------------------------------------------------------
                          99-4130            1999 actual    2000 actual     2001 est.      2002 est.
    -----------------------------------------------------------------------------------------------
    Beginning balance of outstanding system
        obligations.........................      18,079         19,468        20,971         21,495
                                            ============ ==============  ============  =============

      Consolidated systemwide and other bank
        bonds issued........................      11,875          6,155         6,500          6,500
      Consolidated systemwide and other bank
        bonds retired.......................       9,657          3,859         6,376          6,266
      Consolidated systemwide notes, net....        -829           -793           400            500
                                            ------------ --------------  ------------  -------------
    Ending balance of outstanding system
        obligations.........................      19,468         20,971        21,495         22,229
    -----------------------------------------------------------------------------------------------

                                Farm Credit Banks

                   Status of Direct Loans (in millions of dollars)

    ----------------------------------------------------------------------------
    Identification code 99-4160-0-3-371      2000 actual   2001 est.   2002 est.
    ----------------------------------------------------------------------------
    1131  Direct loan obligations...........      47,553      45,173      46,477
                                               ---------   ---------  ----------
    1150  Total direct loan obligations.....      47,553      45,173      46,477
    ----------------------------------------------------------------------------

        Cumulative balance of direct loans
                    outstanding:
    1210  Outstanding, start of year........      45,823      46,693      48,241
    1231  Disbursements: Direct loan
            disbursements...................      47,541      45,227      46,418
    1251  Repayments: Repayments and
            prepayments.....................     -46,651     -43,682     -44,499
    1264  Write-offs for default: Other
            adjustments, net................         -20           3
                                               ---------   ---------  ----------
    1290    Outstanding, end of year........      46,693      48,241      50,160
    ---------------------------------------------------------------------------
        Note.--Loans outstanding at end of year do not include nonaccrual
    loans and sales contracts.

        The Agricultural Credit Act of 1987 (1987 Act) required the Federal
    Land Banks (FLBs) and Federal Intermediate Credit Banks (FICBs) to merge
    into a Farm Credit Bank (FCB) in each of the 12 Farm Credit districts.
    The FCBs operate under statutory authority that combines the prior
    authorities of the FLB and the FICB. No merger occurred in the Jackson
    district in 1988 because the FLB was in receivership. Pursuant to
    section 410(e) of the 1987 Act, as amended by the Farm Credit Banks
    Safety and Soundness Act of 1992, the FICB of Jackson merged with the
    FCB of Columbia on October 1, 1993. Mergers and consolidations of FCBs
    across district lines, that began in 1992 continued through mid-1995. As
    a result of this restructuring activity, 6 FCBs headquartered in the
    following cities, remain: AgFirst FCB, Columbia, South Carolina;
    AgAmerica FCB, Sacramento, California; AgriBank FCB, St. Paul,
    Minnesota; FCB of Wichita, Wichita, Kansas; FCB of Texas, Austin, Texas;
    and Western FCB, Sacramento, California.
        The FCBs serve as discount banks and as of October 1, 2000 provided
    funds to 58 Federal Land Credit Associations (FLCA), 53 Production
    Credit Associations (PCAs), and 32 Agricultural Credit Associations
    (ACAs). These direct lender associations, in turn, make short-term
    production loans (PCAs and ACAs) and long-term real estate loans (FLCAs
    and ACAs) to eligible farmers and ranchers. Also, as of October 1, 2000,
    3 Federal Land Bank Associations originated and serviced long-term real
    estate loans for 1 of the FCBs. FCBs can also lend to local financing
    institutions, including commercial banks, as authorized by the Farm
    Credit Act of 1971, as amended.
        All the capital stock of the FICB's, from organization in 1923 to
    December 31, 1956, was held by the U.S. Government. The 1956 Act
    provided a long-range plan for the eventual ownership of the credit
    banks by the production credit associations and the gradual retirement
    of the Government's investment in the banks. This retirement was
    accomplished in full on December 31, 1968. The last of the Government
    capital that had been invested in the FLB's was repaid in 1947.

    [[Page 1243]]

                            Statement of Operations (in millions of dollars)

    -----------------------------------------------------------------------------------------------
    Identification code   99-4160-0-3-371    1999 actual    2000 actual     2001 est.      2002 est.
    -----------------------------------------------------------------------------------------------
    0101  Total interest income.............       3,317          3,610         3,785          3,894
    0102  Total interest expense............      -2,662         -3,037        -3,316         -3,439
                                            ------------ --------------  ------------  -------------
    0105  Net income or loss (-)............         655            573           469            455
    0111  Other income......................          59             61            31             31
    0112  Other expenses....................        -325           -233          -180           -176
                                            ------------ --------------  ------------  -------------
    0115  Net income or loss (-)............        -266           -172          -149           -145
                                            ------------ --------------  ------------  -------------
    0191  Total revenues....................       3,376          3,671         3,816          3,925
                                            ------------ --------------  ------------  -------------
    0192  Total expenses....................      -2,987         -3,270        -3,496         -3,615
                                            ------------ --------------  ------------  -------------
    0195  Total income or loss (-)..........         389            401           320            310
                                            ------------ --------------  ------------  -------------
    0199  Total comprehensive income........         389            401           320            310
    -----------------------------------------------------------------------------------------------

                                 Balance Sheet (in millions of dollars)

    -----------------------------------------------------------------------------------------------
    Identification code   99-4160-0-3-371    1999 actual    2000 actual     2001 est.      2002 est.
    -----------------------------------------------------------------------------------------------
        ASSETS:
    1201  Cash and investment securities....       9,590          9,978         9,926         10,036
    1206  Accrued Interest Receivable.......         754            770           780            808
          Net value of assets related to
              direct loans receivable and
              acquired defaulted guaranteed
              loans receivable:

    1601    Direct loans, gross.............      45,823         46,693        48,236         50,155
    1603    Allowance for estimated
              uncollectible loans and
              interest (-)..................        -358           -244          -239           -237
                                            ------------ --------------  ------------  -------------
    1699      Value of assets related to
                direct loans................      45,465         46,449        47,997         49,918
    1803  Property, plant and equipment, net         336            298           361            376
                                            ------------ --------------  ------------  -------------
    1999    Total assets....................      56,145         57,495        59,064         61,138
        LIABILITIES:
    2104  Resources payable.................         222            176           191            190
          Accounts payable:

    2201    Consolidated systemwide and
              other bank bonds..............      50,083         52,115        53,568         55,433
    2201    Notes payable and other
              interest-bearing liabilities..         906            313           280            383
    2202  Accrued interest payable..........         511            514           533            551
                                            ------------ --------------  ------------  -------------
    2999    Total liabilities...............      51,722         53,118        54,572         56,557
        NET POSITION:
    3300  Cumulative results of operations..       4,423          4,377         4,492          4,580
                                            ------------ --------------  ------------  -------------
    3999    Total net position..............       4,423          4,377         4,492          4,580
                                            ------------ --------------  ------------  -------------
    4999  Total liabilities and net position      56,145         57,495        59,064         61,137
    -----------------------------------------------------------------------------------------------

                       Statement of Changes in Net Worth (in millions of dollars)

    -----------------------------------------------------------------------------------------------
                          99-4160            1999 actual    2000 actual     2001 est.      2002 est.
    -----------------------------------------------------------------------------------------------
    Beginning balance of net worth..........       4,467          4,423         4,377          4,492
                                            ============ ==============  ============  =============

      Capital stock and participations
        issued..............................          68            153            50             48
      Capital stock and participations
        retired.............................         124            241            54             53
      Surplus Retired.......................
      Net income............................         388            401           319            311
      Cash/Dividends/Patronage Distributions        -341           -267          -219           -218
      Other, net............................         -35            -92            19
                                            ------------ --------------  ------------  -------------
    Ending balance of net worth.............       4,423          4,377         4,492          4,580
    -----------------------------------------------------------------------------------------------

                  Financing Activities (in millions of dollars)

        --------------------------------------------------------------------
                        99-4160                 1999 actual     2000 actual      2001 est.      2002 est.
        --------------------------------------------------------------------
    Beginning balance of outstanding system
      obligations...........................           47,714          50,082         52,115          53,568
                                               ==============  ==============  =============  ==============

      Consolidated systemwide and other bank
        bonds issued........................           43,114          29,025         31,344          32,013
      Consolidated systemwide and other bank
        bonds retired.......................           39,878          30,817         30,714          31,070
      Consolidated systemwide notes, net....             -868           3,825            823             922
                                               --------------  --------------  -------------  --------------

    Ending balance of outstanding system
      obligations...........................           50,082          52,115         53,568          55,433
    -------------------------------------------------------------------------------------------------------

             Federal Agricultural Mortgage Corporation (Farmer Mac)

        Farmer Mac is authorized under the Farm Credit Act of 1971 (the
    Act), as amended by the Agricultural Credit Act of 1987, to create a
    secondary market for agricultural real estate and rural home mortgages
    that meet minimum credit standards. The Farmer Mac title of the Act was
    amended by the 1990 farm bill to authorize Farmer Mac to purchase, pool,
    and securitize the guaranteed portions of farmer program, rural business
    and community development loans guaranteed by the United States
    Department of Agriculture (USDA). The Farmer Mac title was further
    amended in 1991 to clarify Farmer Mac's authority to issue debt
    obligations, provide for the establishment of minimum capital standards,
    and establish the Office of Secondary Market Oversight at the Farm
    Credit Administration (FCA) and expand the agency's rulemaking
    authority. Most recently, the Farm Credit System Reform Act of 1996
    amended the Farmer Mac title to allow Farmer Mac to purchase loans
    directly from lenders and to issue and guarantee mortgage-backed
    securities without requiring that a minimum cash reserve or subordinated
    (first loss) interest be maintained by the lenders, poolers or investors
    as had been required under its original authority. The 1996 Act also
    increased Farmer Mac's capital requirements over time and expanded the
    regulatory authorities of the FCA.
        Farmer Mac operates through two programs, ``Farmer Mac I,'' which
    involves mortgage loans secured by first liens on agricultural real
    estate or rural housing (qualified loans), and ``Farmer Mac II,'' which
    involves guaranteed portions of USDA guaranteed loans. Farmer Mac
    operates by: (i) purchasing, or committing to purchase, newly originated
    or existing qualified loans or guaranteed portions from lenders; (ii)
    purchasing ``AgVantage'' bonds backed by qualified loans or guaranteed
    portions from lenders; and (iii) exchanging qualified loans or
    guaranteed portions for guaranteed securities. Loans purchased by Farmer
    Mac are aggregated into pools that back Farmer Mac guaranteed securities
    which are held by Farmer Mac or sold into the capital markets. Farmer
    Mac is intended to attract new capital for financing qualified loans and
    guaranteed portions, foster increased long-term, fixed-rate lending, and
    provide greater liquidity to agricultural and rural lenders.
        Farmer Mac is governed by a 15 member Board of Directors. Ten Board
    members are elected by stockholders, including five by the Farm Credit
    System and five by commercial lenders. Five are appointed by the
    President, subject to Senate confirmation.

                                    Financing

        Financial support and funding for Farmer Mac's operations come from
    several sources: sale of common and preferred stock; issuance of debt
    obligations; gain on sale of guaranteed loan-backed securities;
    guarantee fees; and income from investments. Under procedures specified
    in the Act, Farmer Mac may issue obligations to the U.S. Treasury in a
    cumulative amount not to exceed $1.5 billion to fulfill its guarantee
    obligations.
        Farmer Mac must maintain core and risk based capital as provided in
    the Act and FCA regulations. As of September 30, 2000, Farmer Mac's
    total capital exceeded statutory requirements.
        Available funds of Farmer Mac are invested in U.S. agency securities
    or other high-grade commercial investments. No stock dividends are
    allowed under the Act until the Board determines that an adequate loss
    reserve has been funded to back Farmer Mac guarantees.

                                   Guarantees

        Farmer Mac provides a guarantee of timely payment of principal and
    interest on securities backed by qualified loans

    [[Page 1244]]

    or pools of qualified loans. These securities are not guaranteed by the
    United States, and are not ``government securities''.
        Farmer Mac is subject to reporting requirements under securities
    laws and its guaranteed mortgage-backed securities are subject to
    registration with the Securities and Exchange Commission under the 1933
    and 1934 Securities Acts.

                                   Regulation

        Farmer Mac is federally regulated by the FCA's Office of Secondary
    Market Oversight (OSMO). OSMO is responsible for examination of and
    rulemaking for Farmer Mac, including the establishment of risk-based
    capital requirements by regulation. On November 12, 1999, FCA published
    a notice of proposed rulemaking, stress test, and a request for public
    comments. Comments were due June 12, 2000. After considering the
    comments, the FCA Board adopted final risk-based capital rule and stress
    test on February 21, 2001. The 1996 amendments to the Farmer Mac title
    expanded FCA's regulatory authority to include provisions for
    establishing a conservatorship or receivership, if necessary, and
    provided for increased levels of core capital phased in over three
    years.

                 Status of Guaranteed Loans (in millions of dollars)

    ----------------------------------------------------------------------------
    Identification code 99-4180-0-3-351      2000 actual   2001 est.   2002 est.
    ----------------------------------------------------------------------------
    2131  Guaranteed loan commitments.......       2,077       2,597       2,306
                                               ---------   ---------  ----------
    2150  Total guaranteed loan commitments.       2,077       2,597       2,306
    ----------------------------------------------------------------------------

        Cumulative balance of guaranteed loans
                    outstanding:
    2210  Outstanding, start of year........       2,057       3,318       4,894
    2231  Disbursements of new guaranteed
            loans...........................       2,077       2,597       2,306
    2251  Repayments and prepayments........        -816      -1,021      -1,200
                                               ---------   ---------  ----------
    2290    Outstanding, end of year........       3,318       4,894       6,000
    ----------------------------------------------------------------------------

        Memorandum:
    2299  Guaranteed amount of guaranteed
            loans outstanding, end of year..       3,318       4,894       6,000
    ---------------------------------------------------------------------------

                            Statement of Operations (in millions of dollars)

    -----------------------------------------------------------------------------------------------
    Identification code   99-4180-0-3-351    1999 actual    2000 actual     2001 est.      2002 est.
    -----------------------------------------------------------------------------------------------
        Revenue:
    0101  Net Interest Income...............          14             18            22             25
    0101  Guarantee Fee Income..............           6              8            10             12
    0101  Gain on Security Issuance.........
    0102  Expense...........................         -14            -18           -23            -27
                                            ------------ --------------  ------------  -------------
    0105  Net income or loss (-)............           6              8             9             10
                                            ------------ --------------  ------------  -------------
    0199  Total comprehensive income........           6              9             9             10
    -----------------------------------------------------------------------------------------------

                                 Balance Sheet (in millions of dollars)

    -----------------------------------------------------------------------------------------------
    Identification code   99-4180-0-3-351    1999 actual    2000 actual     2001 est.      2002 est.
    -----------------------------------------------------------------------------------------------
        ASSETS:
    1201  Investment in securities..........         853            853           853            853
    1206  Receivables, net..................           3              3             4              4
    1207  Advances and prepayments..........          12             15            18             18
          Net value of assets related to
              direct loans receivable:

    1401    Direct loans receivable, gross..       1,278          1,598         1,998          2,198
    1402    Interest receivable.............          30             37            46             55
                                            ------------ --------------  ------------  -------------
    1499      Net present value of assets
                related to direct loans.....       1,308          1,635         2,044          2,253
    1801  Cash and other monetary assets....         506            476            89            100
                                            ------------ --------------  ------------  -------------
    1999    Total assets....................       2,682          2,982         3,008          3,228
        LIABILITIES:
    2201  Accounts payable..................           4              4             6              7
    2202  Interest payable..................          12             15            18             21
    2203  Debt..............................       2,573          2,861         2,870          3,074
    2204  Liabilities for loan guarantees...           6              7             9             11
                                            ------------ --------------  ------------  -------------
    2999    Total liabilities...............       2,595          2,887         2,903          3,113
        NET POSITION:
    3300  Invested capital..................          87             95           105            115
                                            ------------ --------------  ------------  -------------
    3999    Total net position..............          87             95           105            115
                                            ------------ --------------  ------------  -------------
    4999  Total liabilities and net position       2,682          2,982         3,008          3,228
    -----------------------------------------------------------------------------------------------

                          FEDERAL HOME LOAN BANK SYSTEM

                             Federal Home Loan Banks

                   Status of Direct Loans (in millions of dollars)

    ----------------------------------------------------------------------------
    Identification code  99-4200-0-3-371    2000 actual    2001 est.   2002 est.
    ----------------------------------------------------------------------------
    1131  Direct loan obligations...........  4,193,965    4,193,965   4,193,965
                                            -----------  -----------  ----------
    1150  Total direct loan obligations.....  4,193,965    4,193,965   4,193,965
      -------------------------------------------------------------------------
        Cumulative balance of direct loans outstanding:
    1210  Outstanding, start of year........    366,842      444,505     446,727
    1231  Disbursements: Direct loan
            disbursements...................  4,193,965    4,193,965   4,193,965
    1251  Repayments: Repayments and
            prepayments..................... -4,116,302   -4,191,743  -4,191,743
                                            -----------  -----------  ----------
    1290    Outstanding, end of year........    444,505      446,727     448,949
    ----------------------------------------------------------------------------

        The 12 Federal Home Loan Banks were chartered by the Federal Home
    Loan Bank Board under the authority of the Federal Home Loan Bank Act of
    1932 (the Act). The FHLBanks are under the supervision of the Federal
    Housing Finance Board. The common mission of the FHLBanks is to
    facilitate the extension of credit through their members. To accomplish
    this mission, the FHLBanks make loans, called advances, and provide
    other credit products and services to their 7,220 member commercial
    banks, savings associations, insurance companies, and credit unions.
    Advances and letters of credit must be fully secured by eligible
    collateral and long-term advances may be made only for the purpose of
    providing funds for residential housing finance. However, ``community
    financial institutions'' may also use long-term advances to finance
    small businesses, small farms, and small agribusinesses. Additionally,
    specialized advance programs provide funds for community reinvestment
    and affordable housing programs. All regulated financial depositories,
    ``community financial institutions,'' and insurance companies engaged in
    residential housing finance are eligible for membership. Each FHLBank
    operates in a geographic district designated by the Board and together
    the FHLBanks cover all of the United States as well as the District of
    Columbia, Puerto Rico, the Virgin Islands, Guam, American Samoa, and the
    Northern Mariana Islands.
        Advances outstanding on September 30, 2000 totaled approximately
    $420 billion, a net increase of approximately $65 billion from the
    September 30, 1998 level of $365 billion.
        The principal source of funds for the lending operation is the sale
    of consolidated obligations to the public. On September 30, 2000, $577
    billion of these obligations were outstanding. The consolidated
    obligations are not guaranteed by the U.S. Government as to principal or
    interest. Other sources of lendable funds include members' deposits and
    capital. Deposits totaled $14 billion and total capital amounted to $31
    billion as of September 30, 2000. Funds not immediately needed for
    advances to members are invested.
        The capital stock of the Federal Home Loan Banks is owned entirely
    by the members. Initially the U.S. Government purchased stock of the
    banks in the amount of $125 million. The banks had repurchased the
    Government's investment in full by mid-1951.
        The operating expenses of the FHLBanks are paid from their own
    income and are not included in the budget of the United States. Included
    in these expenses are the assessments by the Finance Board to cover its
    administrative and

    [[Page 1245]]

    other costs. The Finance Board's budget and expenditures, however, are
    included in the budget of the United States.
         The Act, as amended in 1989, requires each FHLBank to operate an
    Affordable Housing Program (AHP). Each FHLBank provides subsidies in the
    form of direct grants or below-market rate advances for members that use
    the funds for qualifying affordable housing projects. The FHLBank System
    sets aside for its AHPs the greater of $100 million annually or 10
    percent of the preceding year's net income. The Act, as amended in 1999,
    also requires that the FHLBanks contribute 20 percent of net earnings
    annually to assist in the payment of interest on bonds issued by the
    Resolution Funding Corporation.
        The forecast data for 2001 and 2002 contained in this material
    represents estimates and should not be construed as an official forecast
    of the FHLBanks System's future position.

                            Statement of Operations (in millions of dollars)

    -----------------------------------------------------------------------------------------------
    Identification code   99-4200-0-3-371    1999 actual    2000 actual     2001 est.      2002 est.
    -----------------------------------------------------------------------------------------------
    0101  Revenue...........................      24,596         36,461        36,461         36,461
    0102  Expense (excludes payments to
            REFCORP)........................     -22,553        -34,239       -34,239        -34,239
                                            ------------ --------------  ------------  -------------
    0105  Net income or loss (-)............       2,043          2,222         2,222          2,222
    -----------------------------------------------------------------------------------------------

                                 Balance Sheet (in millions of dollars)

    -----------------------------------------------------------------------------------------------
    Identification code   99-4200-0-3-371    1999 actual    2000 actual     2001 est.      2002 est.
    -----------------------------------------------------------------------------------------------
        ASSETS:
          Investments in US securities:

    1102    Treasury securities, net........         233            232           232            232
    1201  Investments in other securities,
            net.............................     155,471        177,913       177,913        177,913
    1206  Accounts receivable...............       8,057         10,583        10,583         10,583
    1401  Net value of assets related to
            direct loans receivable: Direct
            loans receivable, gross.........     366,842        444,505       446,727        448,949
    1801  Cash and other monetary assets....         399            410           410            410
    1803  Property, plant and equipment, net          88            119           119            119
    1901  Other assets......................         261            204           204            204
                                            ------------ --------------  ------------  -------------
    1999    Total assets....................     531,351        633,966       636,188        638,410
        LIABILITIES:
    2101  REFCORP and Affordable Housing
            Program.........................         580            737           737            737
    2201  Accounts payable..................          59             91            91             91
    2202  Interest payable..................       8,709         11,016        11,016         11,016
    2203  Debt..............................     477,472        577,057       577,057        577,057
          Other:

    2207    Deposit funds and other
              borrowings....................      16,147            869           869            869
    2207    Other...........................       1,452         13,617        13,617         13,617
                                            ------------ --------------  ------------  -------------
    2999    Total liabilities...............     504,419        603,387       603,387        603,387
        NET POSITION:
    3100  Invested capital..................      26,932         30,579        32,801         35,023
                                            ------------ --------------  ------------  -------------
    3999    Total net position..............      26,932         30,579        32,801         35,023
                                            ------------ --------------  ------------  -------------
    4999  Total liabilities and net position     531,351        633,966       636,188        638,410
    -----------------------------------------------------------------------------------------------